IPO Report: Fifth Street Asset Management (FSAM)

Four other companies are scheduled for the week of Oct. 20, 2014. The full IPO calendar is available at IPOpremium.

Manager, Joint-managers: Morgan Stanley, J.P. Morgan, Goldman Sachs, RBC Capital Markets, and Credit Suisse

Co-managers: SMBC Nikko, Deutsche Bank, Barclays, UBS Investment Bank, Janney Montgomery Scott, JMP Securities, Ladenburg Thalmann & Co., KeyBanc Capital Markets, ING, Maxim Group LLC, MLV & Co, Sterne Agee, National Securities, and Natixis.

FSAM scheduled a $200 million with a market capitalization of $1.2 billion at a price range midpoint of $25 for Wednesday, Oct. 22, 2014 on the Nasdaq. SEC filings

Fifth Street Asset Management IPO Report

Overview

FSAM is a leading alternative asset manager with more than $5.6 billion of assets under management.

From December 31, 2010 to June 30, 2014, FSAM’s assets under management grew at a compound annual growth rate of 52.7%.

As of June 30, 2014, approximately 95% of its assets under management reside in publicly traded permanent capital vehicles, Fifth Street Finance Corp. ( FSC) down over 10% in the last month, and Fifth Street Senior Floating Rate Corp (FSFR) down almost 6% in the last month.

Valuation

Glossary

Conclusion

Neutral

Proceeds to founding shareholder.

Per share dilution same as IPO price

4.8% yield on class A stock

Dual stock structure, class A has 3.8% of votes

P/E of 29, Price-to-book of 35

Business

FSAM is a leading alternative asset manager with more than $5.6 billion of assets under management.

FSAM provides innovative and flexible financing solutions to small and mid-sized companies across their capital structure, primarily in connection with investments by private equity sponsors.

FSAM defines small and mid-sized companies as those with annual revenues between $25 million and $500 million.

From December 31, 2010 to June 30, 2014, FSAM’s assets under management grew at a compound annual growth rate of 52.7%.

As of June 30, 2014, approximately 95% of its assets under management reside in publicly traded permanent capital vehicles, consisting of Fifth Street Finance Corp. and Fifth Street Senior Floating Rate Corp.

Fifth Street Finance Corp. ( FSC)

Fifth Street Senior Floating Rate Corp (FSFR)

FSAM’s direct origination platform is sustained by strong relationships with over 300 private equity sponsors.

FSAM believes it is differentiated from other alternative asset managers by its structuring flexibility, financial strength and a reputation for delivering on commitments.

FSAM provides innovative and customized credit solutions across the capital structure, including one-stop financing, unitranche debt, senior secured debt, mezzanine debt, equity co-investments, healthcare asset-backed lending and venture debt financing.

FSAM’s platform targets loans for investment of up to $250 million and will structure and syndicate loans of up to $500 million.

FSAM was named the 2014 “Senior Lender of the Year” by the Association for Corporate Growth (ACG) New York Chapter and The M&A Advisor, the 2013 “Lender Firm of the Year” by The M&A Advisor and the 2013 “Lender of the Year” by Mergers & Acquisitions Magazine.

Competition

FSAM competes in all aspects of its business with other investment management companies, including BDCs, investment funds, private equity funds, traditional financial services companies, such as commercial banks and other sources of financing.

5% shareholders pre-IPO

Leonard M. Tannenbaum            93.8%
Bernard D. Berman        6.2%

Dividends — 4.8% expected dividend

FSAM expects that its first dividend will be paid in the first quarter of 2015 (in respect of the fourth quarter of 2014) and will be $0.30 per share of its Class A common stock. FSAM intends to fund its initial dividend, as well as any future dividends, from its portion of distributions made by Fifth Street Holdings from its available cash generated from operations.

The Class B common stock will not entitle its holders to any cash dividends in their capacity as holders of Class B common stock.

FSAM expects to distribute as dividends to holders of its Class A common stock, on a quarterly basis, substantially all of its allocable share of Fifth Street Holdings' distributable earnings, net of applicable corporate taxes and amounts payable under the tax receivable agreement, in excess of amounts determined to be necessary or appropriate to be retained by Fifth Street Holdings or its subsidiaries to provide for the conduct of its businesses, to make appropriate investments in its businesses and its funds, to comply with the terms of its debt instruments, other agreements or applicable law or to provide for future distributions to FSAM and the Holdings Limited Partners for any ensuing quarter.

FSAM intends to fund its dividends from its portion of distributions made to FSAM by Fifth Street Holdings which, in turn, will fund its distributions to FSAM from distributions that it receives from its subsidiaries.

Use of proceeds

FSAM expects to receive $185 million in proceeds from the IPO and use the money as follows:

to purchase an aggregate of 8,000,000 Holdings LP Interests from the Holdings Limited Partners and will not retain any of these proceeds.

As a result, the purchase price for the Holdings LP Interests will be determined by the public offering price of its Class A common stock in this offering, less underwriting discounts.

Substantially all of the proceeds of this offering will flow to its executive officers, including the Principals.

Of the total proceeds, after taking into account underwriting discounts and commissions but before estimated offering expenses payable by us, $171.7 million are allocable to Mr. Tannenbaum, or the Founding Principal, and the remaining $16.3 million to the other Holdings Limited Partners.